In Burns v RBC Life Insurance Co.,1 the Ontario Superior Court of Justice recently confirmed that liability ultimately rests with insurers where their employees are acting within the scope of their employment.
In this case, the plaintiff had a disability benefits contract with the defendant, RBC Life Insurance Company (“the Insurer”). The defendants, Lauren Mclean and Anna Oslizlok (“the Adjusters”), were the employees of the Insurer who administered the plaintiff’s disability claim.
In September of 2012, the Insurer accepted that the plaintiff was suffering from a total disability related to an injury to his spine. The Insurer approved the payment of long-term disability (“LTD”) benefits to the plaintiff. Pursuant to the Insurer’s policy, total disability was a requirement for the payment of LTD benefits. In 2017, Ms. Mclean advised the plaintiff that his LTD benefits were being terminated on the basis that the plaintiff had not been suffering from a total disability from 2013 onwards. Ms. Oslizlok denied the plaintiff’s appeal of the termination of his LTD benefits.
The plaintiff sued both the Insurer and the Adjusters for breach of contract, negligence, and negligent misrepresentation. Importantly, in his statement of claim, the plaintiff did not distinguish between the conduct of the Insurer and the individual conduct of the adjusters.
The Court’s Ruling on the Personal Liability of the Adjusters
This decision dealt with the adjusters’ motion to strike the claim against them as disclosing no reasonable cause of action. On this type of motion, the Court accepts the pleaded allegations of fact in the statement of claim as proven unless they are patently ridiculous and incapable of proof. The Court concluded that the plaintiff had not pleaded the necessary material facts to make out a claim against the Adjusters in their personal capacity. In the result, the Court struck out the statement of claim against the Adjusters without leave to amend.
In its decision, the Court canvassed recent Court of Appeal decisions relating to the personal liability of employees. The Court observed that it is well-established that an employee may only be liable in their personal capacity where the conduct of the employee manifests a separate identity and interest from the employer and the employee’s actions are themselves tortious. Further, the Court confirmed that insurance adjusters do not owe an independent duty of good faith to an insured. The Court concluded that the plaintiff’s statement of claim failed to plead any facts suggesting that the Adjusters’ alleged misconduct manifested a separate identity from the Insurer.
What Does this Mean for Insurers?
In this decision, the Court confirmed that only in egregious circumstances will an adjuster be exposed to personal liability for their conduct. Liability for the administration of claims ultimately lies with the insurer, who may be vicariously liable for the conduct of the adjusters they employ.
- 2019 ONSC 6977 (released on December 3, 2019).